Impacts, Part One: The Music Industry
So far we've covered plenty of topics, starting on a ski slope thirty-seven years ago with the invention of a very basic portable cassette player. The year was now 2003. The crackdown on Napster had been completed some time ago, and the number of available free mp3s hosted online had begun to rapidly dwindle, plummeting from a leviathan 1.1 billion unique songs during the heyday of the decade's start, to a much smaller 800 million, holding out in smaller, less recognizable sites the law had temporarily overlooked, or nestled in the smuggler's coves of foreign states outside of US jurisdiction. Editorial. (2004, October 30). Special Report: Music's Brighter Future - The Music Industry. The Economist. p. 92. A Sea of Music Dries Up As popular as the iPod had been during it's first two years of existence, statistically, sales had already begun to stagnate somewhat by 2003. Several factors may have contributed to this, but the crackdown on freely available new music on the internet, is possibly one of them. At the turn of the millennium, journalists estimated that of all music consumption taking place at that time in North America, a total somewhere between five to ten percent occurred online, illegally over file sharing websites. And, in US post-secondary institutions such as colleges, onsite surveys also delivered the rather sobering figure that three quarters of students were visiting Napster to download music -- at least once per month. Unsurprisingly, the music industry took note with some level of terror; one organization (Gold Mountain, a management firm hired by Bonnie Raitt and Tracey Chapman, among others) used the phrase "universally in a panic" to describe their outlook, probably without much exaggeration. Goodman, F. (2000, July 06). The Future Is Now. Rolling Stone Magazine. p. 41. For an entertainment sector that accounted for billions of dollars in annual revenue, a market that Steve Jobs had accurately described as "non-speculative" and something that would "always be with us," Jobs, S. (2001, October 26). Apple Keynote Address. a great deal of money was being lost to inadvertent scofflaws, carefree youths pursuing higher education, chilling to their free, stolen copies of Eminem, N'Sync, and Britney Spears. I mention these bands in particular, because according to music statistics organization SoundScan, they accounted for the top three download trends on Napster during the summer of 2000, contributing to a 2.5 percent sales loss overall in the legitimate CD market for the same content. Goodman, F. (2000, July 06). The Future Is Now. Rolling Stone Magazine. p. 41. Analysts and journalists alike, however, were rapidly coming to a conclusion. People didn't download bootlegged Napster mp3s necessarily because they were free. The general opinion being formed was that the popularity of this new method was at least partially attributable to pure convenience, and the freedom from suffering exposure to "filler material," or substandard songs composed by an artist to justify an album release (and higher retail price) over a smaller, cheaper EP. Napster, as it was, let you pick and choose exactly what song you wanted, hardly the flexibility the local HMV would allow. The argument being presented to the traditionalist music labels like Warner, BMG, and the others, was that the music thieves might willingly come back in from the cold, if only they were presented a convenient way to pay for their track-by-track music selections Boutin, P. (2001, December 18). Don’t Steal Music, Pretty Please. Salon.com. Retrieved June 30, 2012, from http://www.salon.com/2001/12/18/dont_steal_music. without drastically altering the format the music was offered online. However, as compelling as this argument might have been presented, the points being made, were ultimately being missed. The dollar-per-download scheme being envisioned was not being adopted anytime soon, and the closest one could get to being a law-abiding citizen of the online music scheme, was through bulky, subscription based sites that streamed music (therefore preventing it from being downloaded or placed on an mp3 player). Nobody, it seemed, was listening to the press. Nobody, that is, but Apple Computer, looking for a shot in the arm for lagging sales of their flagship personal audio player. Creating a New Oasis The music industry had not been totally dumb to consumer demand. A consortium called the Secure Digital Initiative (comprising of over 200 music labels and vendors) had already spearheaded efforts to research online-based music downloading, dumbfoundingly, as early as 1994, Goodman, F. (2000, July 06). The Future Is Now. Rolling Stone Magazine. p. 41. but these forward thinking efforts had fallen flat as nobody could agree upon a standard file format to package the music in, all parties still shunning the mp3 for various reasons. And Sony, never resting in its tragic quest to regain market dominance, later tried to partner with Universal to offer a web-based competitor to Napster, that would contain a massive library almost as big as iTunes is today. But, all these efforts were unsuccessful. And so when the law swept down on peer-to-peer file sharing come 2003, there was little more than a void as the number of mp3s circulating online began to shrink. Steve Jobs, however, saw an opportunity calling in the one-dollar price per song, that the newspapers had been proposing for some time. He would use his negotiating and persuasion skills, to successfully form a cooperation with Universal in a way that Sony had recently been unable to. His proposal, was to gradually license the entire music library under their jurisdiction, and offer it through a web-connected iTunes, with every track selling at 99 cents, or a whole album at ten dollars. There was nothing revolutionary different between his idea and those proposed earlier in the decade by the Japanese electronics giant, but there was one major factor that Jobs could use as leverage, in a way that Sony could not. His company, not Sony, had the iPod, the mp3 player that everyone wanted, the mp3 player that the industry was universally in awe of. By making iTunes iPod exclusive, not only would his company benefit, but so would Universal, as hundreds of thousands of new iPod owners would get red-carpet access to Universal owned content. Obviously, we brush over a great deal of backroom deliberations and negotiations for the sake of reader convenience. In all, eighteen months of work went into the effort behind bringing iTunes from dream to reality. That investment of time, however, would prove to pay dividends, as the market that Apple had entered as a newcomer -- the music industry -- began to change and adapt; piracy rates began to drop (perhaps not as much as some predicted, or had hoped), and beneficially to Apple, iPod sales began to skyrocket. By the first birthday of the new online music service, in 2004, 70 million mp3s had been legally purchased, and sales of the mp3 player had not doubled, not quadrupled, but increased tenfold over the same period the year before, some 800,000 of them selling over just a 90 day period Editorial. (2004, April 28). Apple Celebrates iTunes Birthday, Claims 70 Million Songs Sold. Agence France Presse. When the formula proved to work, others jumped on the bandwagon, and soon a dozen imitators existed. But the tried and true Apple Design philosophy, even present in the iTunes user interface, seemed unbeatable. And although the iPod had been PC compatible since 2002 Editorial. (2002, July 22). iPod Making Apple Pie With Windows. Variety. p. 16. using software by MusicMatch, iTunes was quickly ported by the end of the year. The portable audio player which had been introduced during a low-key keynote address some three years earlier, had in effect, just changed the world of music. PLAYBACK CONTROL << RW | FFWD >> References and Citations Category:Articles Category:The Rise of the iPod